Question 1

The mathematical expression of a relationship between two or more variables is usually known as

Accepted Answer

A)  a definition. 
B)  an assumption. 
C)  an observation. 
D)  a function. 
E)  a theory. 
A)  a definition. 
B)  an assumption. 
C)  an observation. 
D)  a function. 
E)  a theory.

Question 2

An index number expresses the value of a variable in any given period

Accepted Answer

A)  as a percentage of its value in the base period. 
B)  as a weighted average. 
C)  as a proportional weighted average. 
D)  as an average of its value in the base period. 
E)  as an absolute compared to the base period. 
A)  as a percentage of its value in the base period. 
B)  as a weighted average. 
C)  as a proportional weighted average. 
D)  as an average of its value in the base period. 
E)  as an absolute compared to the base period.

Question 3

FIGURE 2-1
-Suppose that over a 12-month period, Sonaliʹs income Y) rises from $27 000 to $35 000 per year and, as a result, her spending on travel T) increases from $1500 to $2500 per year. Assume there is a linear relation between the two variables, Y and T. What is the marginal response in T to a change in Y?

Accepted Answer

A)  8 
B)  4 
C)  0 
D)  0.25 
E)  0.125 
A)  8 
B)  4 
C)  0 
D)  0.25 
E)  0.125

Question 4

Let 1 stand for ʺany given periodʺ and 2 stand for ʺbase period.ʺ The formula of any index number can be written as

Accepted Answer

A)  value of index at 1 = absolute value at 1 × 100. absolute value at 2 
B)  value of index at 1 = absolute value at 2 × 100. absolute value at 1 
C)  value of index at 1 = relative value at 1 × 100. relative value at 2 
D)  value of index at 1 = absolute value at 1 . absolute value at 2 
E)  value of index at 1 = relative value at 1 . relative value at 2 
A)  value of index at 1 = absolute value at 1 × 100. absolute value at 2 
B)  value of index at 1 = absolute value at 2 × 100. absolute value at 1 
C)  value of index at 1 = relative value at 1 × 100. relative value at 2 
D)  value of index at 1 = absolute value at 1 . absolute value at 2 
E)  value of index at 1 = relative value at 1 . relative value at 2

Question 5

The statement that a 2% increase in the money supply leads to a 2% increase in the price level is an example of an)

Accepted Answer

A)  prediction. 
B)  assumption. 
C)  normative statement. 
D)  variable. 
E)  model. 
A)  prediction. 
B)  assumption. 
C)  normative statement. 
D)  variable. 
E)  model.

Question 6

The statement that a countryʹs rate of economic growth is influenced by its firmsʹ investment behaviour is an example of an)

Accepted Answer

A)  variable. 
B)  prediction. 
C)  normative statement. 
D)  theory. 
E)  economic law. 
A)  variable. 
B)  prediction. 
C)  normative statement. 
D)  theory. 
E)  economic law.

Question 7

FIGURE 2-4
-Refer to Figure 2-4. If we want to know the marginal response of ʺyield per acreʺ due to a change in ʺfertilizer applied per acre of wheatʺ at point B, then we should determine the

Accepted Answer

A)  slope of a straight line tangent to point B. 
B)  slope of a straight line joining points B and C. 
C)  yield per acre at 30 units of fertilizer. 
D)  the slope of a straight line from the origin to point B. 
E)  quantity of fertilizer applied at point B. 
A)  slope of a straight line tangent to point B. 
B)  slope of a straight line joining points B and C. 
C)  yield per acre at 30 units of fertilizer. 
D)  the slope of a straight line from the origin to point B. 
E)  quantity of fertilizer applied at point B.

Question 8

A theory

Accepted Answer

A)  enables one to predict the future with certainty. 
B)  is designed to explain and predict what we observe. 
C)  is used to impose order on the world. 
D)  can only be tested with a controlled experiment. 
E)  assumes definitions for variables. 
A)  enables one to predict the future with certainty. 
B)  is designed to explain and predict what we observe. 
C)  is used to impose order on the world. 
D)  can only be tested with a controlled experiment. 
E)  assumes definitions for variables.

Question 9

Choose the statement that best describes how endogenous variables differ from exogenous variables.

Accepted Answer

A)  An endogenous variable is explained within the theory, while an exogenous variable influences the endogenous variables but is determined outside the theory. 
B)  An endogenous variable is a flow, while an exogenous variable is a stock. 
C)  An endogenous variable is explained outside the theory and influences an exogenous variable while an exogenous variable is explained within the theory. 
D)  An exogenous variable is a function of the endogenous variable, and both are flow variables. 
E)  An endogenous variable is a function of the exogenous variable, and both are stock variables. 
A)  An endogenous variable is explained within the theory, while an exogenous variable influences the endogenous variables but is determined outside the theory. 
B)  An endogenous variable is a flow, while an exogenous variable is a stock. 
C)  An endogenous variable is explained outside the theory and influences an exogenous variable while an exogenous variable is explained within the theory. 
D)  An exogenous variable is a function of the endogenous variable, and both are flow variables. 
E)  An endogenous variable is a function of the exogenous variable, and both are stock variables.

Question 10

FIGURE 2-3
-Refer to Figure 2-3. On curve A, the maximum value of Y occurs at

Accepted Answer

A)  values of X greater than X3. 
B)  X3. 
C)  X2. 
D)  X1. 
E)  X = 0. 
A)  values of X greater than X3. 
B)  X3. 
C)  X2. 
D)  X1. 
E)  X = 0.

Question 11

Disagreements over positive statements

Accepted Answer

A)  cannot arise because positive statements are facts. 
B)  are best handled by an appeal to the facts. 
C)  arise from the failure to distinguish between a positive and a normative statement. 
D)  are basically devoid of any emotion. 
E)  never occur. 
A)  cannot arise because positive statements are facts. 
B)  are best handled by an appeal to the facts. 
C)  arise from the failure to distinguish between a positive and a normative statement. 
D)  are basically devoid of any emotion. 
E)  never occur.

Question 12

Consider the following equation: Y = 10 + 5X - X2. This equation is an expression of

Accepted Answer

A)  a functional relation between X and Y. 
B)  two dependent variables in a functional relation. 
C)  two independent variables in a functional relation. 
D)  a functional relation in a schedule format. 
E)  a functional relation in a verbal format. 
A)  a functional relation between X and Y. 
B)  two dependent variables in a functional relation. 
C)  two independent variables in a functional relation. 
D)  a functional relation in a schedule format. 
E)  a functional relation in a verbal format.

Question 13

Which is the best description of positive statements? Positive statements

Accepted Answer

A)  have been verified by appeal to factual evidence. 
B)  form the basis of all normative arguments. 
C)  are falsifiable in principle by appeal to factual evidence. 
D)  are seldom employed in social sciences like economics. 
E)  have no place in economics because economics deals only with value judgments. 
A)  have been verified by appeal to factual evidence. 
B)  form the basis of all normative arguments. 
C)  are falsifiable in principle by appeal to factual evidence. 
D)  are seldom employed in social sciences like economics. 
E)  have no place in economics because economics deals only with value judgments.

Question 14

FIGURE 2-3
-Refer to Figure 2-3. At X2 on curve B, the

Accepted Answer

A)  maximum occurs at Y1. 
B)  minimum occurs at Y4. 
C)  slope of the curve is zero. 
D)  slope is increasing. 
E)  slope is decreasing. 
A)  maximum occurs at Y1. 
B)  minimum occurs at Y4. 
C)  slope of the curve is zero. 
D)  slope is increasing. 
E)  slope is decreasing.

Question 15

The table below shows hypothetical data for the volume of gold and nickel output across several years.   TABLE 2-6
-Refer to Table 2-6. What is the index number for gold output in Year 8?

Accepted Answer

A)  104.1% 
B)  104.1 
C)  1.04 
D)  60 
E)  60% 
A)  104.1% 
B)  104.1 
C)  1.04 
D)  60 
E)  60%

Question 16

Economics is scientific because

Accepted Answer

A)  economists routinely conduct controlled experiments. 
B)  individual behaviour is predictable. 
C)  economists routinely conduct laboratory experiments. 
D)  economists use data. 
E)  economists test hypotheses by appealing to empirical evidence. 
A)  economists routinely conduct controlled experiments. 
B)  individual behaviour is predictable. 
C)  economists routinely conduct laboratory experiments. 
D)  economists use data. 
E)  economists test hypotheses by appealing to empirical evidence.

Question 17

The table below shows hypothetical data for the volume of gold and nickel output across several years.   TABLE 2-5
-Refer to Table 2-5. What is the index number for gold output in Year 1?

Accepted Answer

A)  0.91 
B)  109.7 
C)  1.097 
D)  91.2 
E)  99.7 
A)  0.91 
B)  109.7 
C)  1.097 
D)  91.2 
E)  99.7

Question 18

The table below shows hypothetical data for volumes of e-books and hardcover books sold over a 3-year period in a particular city.   TABLE 2-3
-Refer to Table 2-3. Suppose we choose Year 1 as the base year and construct a series of index numbers with which to analyze sales data. The index numbers for volumes of hardcover books sold starting with Year 1) is

Accepted Answer

A)  431; 819; 100. 
B)  43.1; 81.9; 100. 
C)  100; 81.9; 43.1. 
D)  100; 0.819; 0.431. 
E)  0.431; 0.819; 100. 
A)  431; 819; 100. 
B)  43.1; 81.9; 100. 
C)  100; 81.9; 43.1. 
D)  100; 0.819; 0.431. 
E)  0.431; 0.819; 100.

Question 19

On a coordinate graph with y on the vertical axis and x on the horizontal axis, suppose point A represents co-ordinates X = 10, Y = 12) and point B represents co-ordinates X = 5, Y = 7). The slope of the straight line joining points A and B is

Accepted Answer

A)  -1. 
B)  1. 
C)  2/3. 
D)  3/2. 
E)  5/6. 
A)  -1. 
B)  1. 
C)  2/3. 
D)  3/2. 
E)  5/6.

Question 20

Which of the following is a normative statement?

Accepted Answer

A)  The sun rises in the west and sets in the east. 
B)  A government deficit will reduce unemployment and cause an increase in prices. 
C)  Reducing unemployment is more important than reducing inflation. 
D)  Queen Elizabeth II is the wealthiest woman in the world. 
E)  An increase in the price of lumber is followed by a decrease in the construction of new houses. 
A)  The sun rises in the west and sets in the east. 
B)  A government deficit will reduce unemployment and cause an increase in prices. 
C)  Reducing unemployment is more important than reducing inflation. 
D)  Queen Elizabeth II is the wealthiest woman in the world. 
E)  An increase in the price of lumber is followed by a decrease in the construction of new houses.

Exam 2: Economic Theories, Data, and Graphs

The mathematical expression of a relationship between two or more variables is usually known as

An index number expresses the value of a variable in any given period

Let 1 stand for ʺany given periodʺ and 2 stand for ʺbase period.ʺ The formula of any index number can be written as

The statement that a 2% increase in the money supply leads to a 2% increase in the price level is an example of an)

The statement that a countryʹs rate of economic growth is influenced by its firmsʹ investment behaviour is an example of an)

FIGURE 2-4 -Refer to Figure 2-4. If we want to know the marginal response of ʺyield per acreʺ due to a change in ʺfertilizer applied per acre of wheatʺ at point B, then we should determine the

A theory

Choose the statement that best describes how endogenous variables differ from exogenous variables.

FIGURE 2-3 -Refer to Figure 2-3. On curve A, the maximum value of Y occurs at

Disagreements over positive statements

Consider the following equation: Y = 10 + 5X - X2. This equation is an expression of

Which is the best description of positive statements? Positive statements

FIGURE 2-3 -Refer to Figure 2-3. At X2 on curve B, the

The table below shows hypothetical data for the volume of gold and nickel output across several years. TABLE 2-6 -Refer to Table 2-6. What is the index number for gold output in Year 8?

Economics is scientific because

The table below shows hypothetical data for the volume of gold and nickel output across several years. TABLE 2-5 -Refer to Table 2-5. What is the index number for gold output in Year 1?

On a coordinate graph with y on the vertical axis and x on the horizontal axis, suppose point A represents co-ordinates X = 10, Y = 12) and point B represents co-ordinates X = 5, Y = 7). The slope of the straight line joining points A and B is

Which of the following is a normative statement?

Economic Issues and Concepts

Demand, Supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, Interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Trade Policy

Exchange Rates and the Balance of Payments

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